Unsure how to think about debt relating to real estate

Member since 2025 · 4 posts · 5 votes

I'm 20 years old, never had any debt or credit before. I don't currently have any property and probably won't for at least a year or 2. My parents are huge Dave Ramsey advocates, and I think they're unsure about my interest in real estate investing because of the usual "need" for different forms of financing. They're not against mortgages, just borrowing of any other kind. As I research I'm starting to realize the benefit financing can have for this type of investing to scale your portfolio. When I do purchase my first property I want to put as much down as possible and house hack my way to my second property. Any advice or different ways I can think about how financing could be a useful tool?

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Nicholas L.Pro Member

Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes

@Jack OMalley

start with a house hack

talk to lenders about programs that may be available

all things being equal, I'd put less down to start and keep your cash for other uses

good luck

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Nicholas L.Pro Member
Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
1y
@Jack OMalley
start with a house hack
talk to lenders about programs that may be available
all things being equal, I'd put less down to start and keep your cash for other uses
good luck
7 Reply
Wale LawalBusiness Member
Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
1y
@Jack OMalley
It’s great that you’re thinking ahead and planning to house hack—smart move for a first property. While your parents’ debt-averse mindset has likely helped you stay financially disciplined, it’s worth reframing financing as a tool rather than a burden when used responsibly. In real estate, leverage allows you to control more assets and build wealth faster than saving to buy everything in cash—especially if the property cash flows and appreciates. The key is using conservative underwriting and ensuring every deal pays for itself.
Good luck!
[email protected]832-776-9582 Podcast Guest on Show #469
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- Jack OMalley
  OP
  Member since 2025 · 4 posts · 5 votes
  1y
  @Wale Lawal thank you so much that makes so much sense!
  0 Reply
Caleb Brown
Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
1y
Love Dave Ramsey. Dave Ramsey got burned by over leveraging and he would use cash and not use leveraging when he restarted. It's a slower way to scale but he has the income where it doesn't matter. I think you have to figure out where you are risk wise. Leveraging is a tool. If used too much you can sink your ship. Not using any can be a slow way to grow. I do agree in not racking up personal debt(credit cards, vehicle's, etc). Having too much personal debt will hurt you for investing. Your income is one of the best tools to grow your wealth and debt drags that down. Focus on a house hack out the gate along with saving and building a strong foundation(income, budgeting). As you buy your first property you can learn and decide where to go next.
2 Reply
- Jules Aton
  MD/DC · Member since 2024 · 1k+ posts · 1k+ votes
  1y
  Quote from @Caleb Brown:
  
  Love Dave Ramsey. Dave Ramsey got burned by over leveraging and he would use cash and not use leveraging when he restarted. It's a slower way to scale but he has the income where it doesn't matter. I think you have to figure out where you are risk wise. Leveraging is a tool. If used too much you can sink your ship. Not using any can be a slow way to grow. I do agree in not racking up personal debt(credit cards, vehicle's, etc). Having too much personal debt will hurt you for investing. Your income is one of the best tools to grow your wealth and debt drags that down. Focus on a house hack out the gate along with saving and building a strong foundation(income, budgeting). As you buy your first property you can learn and decide where to go next.
  
  Well said and I think under appreciated in RE circles. Using RE as leverage for more deals can be a tool to expand quicker than one could otherwise but overleveraging can be the kiss of death. Finding the middle ground is key. And as @Wale Lawal noted your upbringing may serve you well to find that balance.
  1 Reply
- Wale LawalBusiness Member
  Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
  1y
  Quote from @Jules Aton:
  
  Quote from @Caleb Brown:
  
  Love Dave Ramsey. Dave Ramsey got burned by over leveraging and he would use cash and not use leveraging when he restarted. It's a slower way to scale but he has the income where it doesn't matter. I think you have to figure out where you are risk wise. Leveraging is a tool. If used too much you can sink your ship. Not using any can be a slow way to grow. I do agree in not racking up personal debt(credit cards, vehicle's, etc). Having too much personal debt will hurt you for investing. Your income is one of the best tools to grow your wealth and debt drags that down. Focus on a house hack out the gate along with saving and building a strong foundation(income, budgeting). As you buy your first property you can learn and decide where to go next.
  
  Well said and I think under appreciated in RE circles. Using RE as leverage for more deals can be a tool to expand quicker than one could otherwise but overleveraging can be the kiss of death. Finding the middle ground is key. And as @Wale Lawal noted your upbringing may serve you well to find that balance.
  
  @Jules Aton
  
  Great point
  [email protected]832-776-9582 Podcast Guest on Show #469
  NETWORTH BUILDERS5236 Reviews
  Website View Page
  1 Reply
Amanda Breck
Attorney · UT · Member since 2025 · 33 posts · 59 votes
1y
Another potential way to approach debt relating to real estate is through the lens of asset protection. When a property is encumbered by a mortgage or something like a HELOC, potential creditors can see that in an asset search and it makes those assets less attractive to potential creditors. If liability arises with your real estate activity, having the property encumbered in some way may help dissuade a lawsuit if a creditor sees they aren't going to get anything out of the property because someone else is entitled to the value first. I would not rely on this as a primary method for asset protection, you still should consider LLC structuring and have good insurance, but it can be a solid part of a wholistic asset protection approach.
2 Reply
Michael S.
Huntsville, AL · Member since 2018 · 577 posts · 864 votes
1y
Everyone is entitled to their opinion on Dave Ramsey.
That said, if I had followed his philosphy to the letter, I would have one less degree and probably 1/8 of my current net worth.
0 Reply
Dan H.Pro Member
Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
1y
More than 5 years ago the common sentiment on this site is cash flow is king and appreciation was icing on the cake. Today the view on the site recognizes that leveraged appreciation in most markets is where the highest return is achieved.
If a market appreciates 10% at 95% LTV, the return from appreciation is 200%. At 0% LTV, the return from appreciation is 10%.
Note high leverage does not necessarily mean high risk or over leveraged. It depends on how much reserves you have, your reserves, your income, your cash flow and likely some other items.
My DTI for 2024 is over 600 to 1 meaning for every dollar of income, I owe over $600. In addition, I strive for at high a LTV as I can obtain. Does this imply anything other than lenders consider me low risk for reasons other than my income? Does it imply I am over leveraged? Does it imply that I have taken outlandish risks? My view is I am neither. I assure you the if there was a recession to rival the GFC, I am in a position to come out fine.
In addition, it is best to take risks when you have little to lose. As you have more to lose, it is prudent to be cautious.
At 20 years old, leverage is your friend. If you have to start over again, you have plenty of time to start over.
Therefore my recommendation is to understand risk/reward, but at your age you can be more aggressive than later in life.
Good luck

1 Reply
Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
1y
The chances of you being able to own a home without a mortgage are are pretty low in most areas. Save up a down payment of 20% to avoid mortgage insurance and buy a home that works for you and one you will live in for at least a few years (otherwise it is cheaper to rent because of the costs associated with buying and selling). If you are buying rentals, don't try to scale too quickly and be realistic about what you can do and don't stretch yourself too thin.
2 Reply
Becca F.
Rental Property Investor · San Francisco Bay Area · Member since 2022 · 1k+ posts · 1k+ votes
1y
I agree with the house hack. I'm not a fan of putting large down payments - you lose liquidity and it's difficult to get that money out of the property in case you need it (e.g emergency situations like job loss, high medical bills). At the same time not overleveraging and trying to find a balance.
As far as not having any credit, if you're trying to get a conventional loan, you'll need a credit score.
Would try to keep other spending low meaning don't buy expensive cars, clothes etc and work on increasing income. Not sure if you're in college, working full time or part-time but for me I learned a lesson from Gen Z is to job hop. My W2 salary increased substantially by doing this - the old days of staying loyal to an employer for 20 to 30 years doesn't work too well unless they give you significant raises.
You have the gift of time by planning this out at age 20. Good luck on your real estate journey.
0 Reply
Chris Watkins
Lender · Eugene, OR · Member since 2021 · 245 posts · 154 votes
1y
Once you have your emergency fund and some reserves together, put as little down into the house as long as the monthly payment is comfortable to you. Take any extra money and put in into an investment account that will earn you a return while remaining available should you find another target property.
Building your credit will take 4-6 months to get started, so make sure to get that going soon!
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